Monday, 19 October 2015

Inflationary ripples in the DRC

There's been another burst of inflation in the DRC, in the north western village of Zongo, opposite the Central African Republic's capital of Bangui. I wrote about inflationary hikes in the country in my last blog post.

Inflation is a rise in prices, often persistent. In Western countries, two frequent causes of major inflation are government operations to change the money supply, and changes in the price of natural commodities. Both of those also happen in the DRC, but the causes of the recent bursts in the country relate to the arrival of refugees from conflict in the CAR (who want to buy the same goods as the Congolese), and interruptions in transport (reducing the amount of goods to buy). A feature of these DRC-specific causes is not present in the causes in most Western countries (at least not totally present - government buying and selling of their own bonds is a bit similar). The feature is that they tend to end fully by themselves. Transport starts working again, refugees go home. So an inflationary "ripple" occurs, with a rise above trend, then a fall below trend, then restoration to the trend.

I don't know whether anyone has analysed inflationary ripples, but there is probably a lot of work that could be done there.